The hardest approach to bridge financing is when someone tries to leverage an actual transaction to provide for the bridge funds. A typical example would be something like a purchase order or sales contract where there is a definite beginning and end of the transaction with profit to pay for the cost of funds. All that is required is capital to make everything word for the defined period of time.
But trying to arrange bridge financing in this manner is complex to say the least as any lender is going to want to know all aspects of the transaction and work towards off loading as much risk as possible through transaction controls, insurance, etc. This takes time and can cost quite a bit of money.
When using private mortgage financing to fund a bridge loan, the actual use of funds is largely irrelevant to the lending decision as a private mortgage is mostly an equity loan based largely on the value of the real estate offered as security.
So instead of wasting weeks and potentially months getting a lender or investor comfortable with financing a specific transaction, a bridge loan mortgage funded through private money can be completed from start to finish in as little as two to five business days.
And once again, the property offered as security doesn’t have to have anything to do with the transaction.
Another advantage of a real estate based bridge loan mortgage is that its going to be considerably cheaper in most cases to any other type of bridge financing option, even compared to a bank or institutional option.
The key to getting the best private lending deal will be the strength of the exit strategy to repay the debt. While all the mechanics of the transaction that requires the bridge loan may not need to be understood by the private lender, they will be interested in the plan to repay the loan at the specified end date of the bridge financing period.
The stronger the exit strategy, the more likely multiple private mortgage options will be available and at more competitive rates.
In contrast, the weaker the exit strategy, then the more limited and expensive the private mortgage options are likely to be.
If you have a bridge loan requirement and real estate equity to leverage for either a real estate based or non real estate based deal, please give me a call so I can quickly go over your requirements and provide bridge loan mortgage options for your immediate consideration.